Abstract The paper examines corporatefinance, focusing on the efficient market hypothesis. The paper further examines the behavioural finance school of thought, which argues that any investment decision is a gamble when investors are not fully aware of the future results of their actions. The paper discusses how, due to human psychology, investors often act irrationally, thereby decreasing the market transparency and predictability, together with decreasing market efficiency. The paper concludes that this increases the importance of recent behavioral finance studies, as capital markets are driven by purely human behavior and thus are subject to huge risks.
Outline:
Introduction
Behavioural Finance Approach to Market Efficiency Theory
Conclusion
References
From the Paper "Fridson in his work argues that all the investors have their sentiments, or biases when considering risk and making investment decisions. Thus, the risk premium on any asset is the summary of fundamental premium set by efficient investors and of sentiment premium or the investors judgements errors. Also, there are asset prices bubble theories which also prove that in some points of time investors do behave irrationally and overestimate or underestimate factual fundamentals which leads to none fundamental increases in some asset prices followed by further price crash."
Abstract This paper discusses the advantages and disadvantages of the use of the sinking fund in corporate bonds from the viewpoint of the corporation and the bondholders. This paper also discusses the advantages and disadvantages of the call provision from the viewpoint of the corporation as well as its bondholders. These elements carry heavy weight when considering expansion into an international market. The corporation's current status and ratings play a big role in what kind of financing is available and what kind of future debt will be acquired. Key members of management must keep all areas of performance in mind when formulating a strategy for entry. With this in mind, the paper also analyzes factors that effect performance such as bonds yield to maturity. The writer explores the issue of risk as a constant factor evident in business. It can be seen as both a positive and a negative. Risk affects all facets of the corporation, not only the foreign subsidiary but also company performance. It is therefore important to include a risk assessment as a part of any global strategy.
Introduction
Role of Debt Over Equity
The Sinking Fund
The Call Provision
Factors Effecting Yield to Maturity
Factors Effecting Risk
Conclusion
From the Paper "The role of debt over equity is important to consider as a company expands, as it is a true indicator of how the company will succeed. It describes how the company manages its money in its balance sheets. It refers to money the company owes and does not expect to pay off within the next year. In business, there are long term and short term debts. These debts are categorized by how lengthy a repay period there is with the creditor. A good sign that the company is succeeding is when the equity outweighs the debt or that the debt is getting smaller over time. This indicates a certain amount of health within the organizational structure. However, companies with more long-term debt than short-term debt find themselves in trouble because they must continue to pay interest payments and risk having little working capital. It is important a company pay close attention upfront when borrowing money and note the interest rate of the loans as some fall privy to market fluctuation. Long-term debt is more volatile as interest rates can be influenced by economic changes. It is important to analyze how a new international location is doing before committing to entry there. Still interest rates plays a dramatic role in how banks rate a company the ability to pay on time. In this way it benefits the banks more as they are able to "spur innovation to extract return for investors via new structures, some involving high leverage" ("The Financial Stability Conjuncture and Outlook" 51). Debt always works to benefit the banks in this way."
Tags: bonds, sinking, funds, corporate, bonds, market, international
Abstract This paper analyzes the article, "Finance and Growth: Schumpeter Might Be Right," written by Robert King and Ross Levine in 1993. The paper discusses globalization's impact in corporatefinance in developing countries and discusses the article's view on the subject. It also looks at the content of the article and the validity of its claims and provides an overall review of the article.
Table of Contents:
Introduction
Summary
Analysis/Critical Evaluation
Conclusions
From the Paper "Globalization's impact in corporate finance in developing countries has thus been enormous, guiding the corporations into the adoptions of new financial and accounting standards, in the increase of their transparency and corporate governance standards, as well as in adopting risk management instruments in order to hedge their commitments on the financial markets. Further more, they are decreasing their financial leverage so as to decrease their debt to equity ratios and develop a more prudent approach. The future participation of corporations in developing countries on international financial markets will most likely increase in trend, as well as in approach."
Abstract Perhaps the first issue addressed in this paper is a consideration of the possible conflict caused by various governmental regulations on the corporate goal of increasing shareholder wealth is this: Is there any effect? The second question examined-and perhaps the more important one in today's global business and social environment-is this: Is the maximization of shareholder wealth the appropriate goal for a business entity? The paper shows that, indeed, with Europe embracing human rights as a major issue, and in view of the current divisive atmosphere in the United States concerning both corporate governance and governmental transfer payment restructuring (Social Security), it seems advisable to consider these questions from a broad-based global perspective and also from the perspective of other 'stakeholders' in global business besides the shareholder. These stakeholders would include, of course, all citizens of the globe and not merely those with sufficient income to become stakeholders.
Paper Outline:
Introduction
Tavis' Model
Demonstrations from the Shareholder Norm
References
From the Paper "While that is a normative theory that gives rise to a complex of actions, the stakeholder theory proposed by Tavis "is more of a description of who has a stake in the activities of the firm than a normative theory" (2002 Database). Tavis quotes R. Edward Freeman, who defined stakeholders: "A stakeholder in an organization is (by definition) any group or individual who can affect or is affected by the achievement of the organization's objectives" (2002, Database). This much more inclusive definition makes it clear that unless a corporation is living on a planet of its own, a closed and moreover perfect system of equality of risk, reward, 'collateral damage' and any effect imaginable, then it is incumbent on management of that corporation to consider not merely the shareholders as traditionally defined."
Abstract This paper explains that traditional financial thinking relies on assumptions of certainty, complete knowledge and market efficiency and in this context, financial decisions should be relatively straightforward. In the real world though, many times what is observed deviates greatly from what would be expected using traditional financial thinking. This paper therefore uses different game theory models to more accurately explain observed financial decisions dealing with capital structure, corporate acquisitions and initial public offerings (IPOs).
From the Paper "Game theory has made great strides in explaining many of the observed phenomena falling under corporate finance. One example is the capital structure decided upon by a firm's management. Capital structure deals with the firm's decision to raise funds through debt versus equity and what ratio of debt to equity should the firm maintain. Modigliani and Miller in 1958 showed that in perfect capital markets (i.e. no frictions and symmetric information) and no taxes a firm could not change its total value by altering its debt/equity ratio; thus capital structure is irrelevant. However in the real world, capital structure is carefully thought about by every company, and it is in fact not irrelevant because taxes do exist and capital markets are not perfect."
Abstract This paper reviews the world of finance investment by examining the services of three major companies: Goldman Sachs, Lehman Brothers and Morgan Stanley. The author points out that the potential prospects for a job in the realm of finance investment are wide and varied in areas like corporatefinance, mergers and acquisitions (M&A), project finance, trading, structured finance and derivatives. The paper relates that, as a greenhorn analyst in corporatefinance, the candidate is normally expected to work within a client team, shoulder the responsibilities to make registration statements and participate in road shows where investors are sold in securities; the major companies in this domain of activity are Merrill Lynch, PaineWebber and Salomon/SmithBarney.
Table of Contents
Thesis Statement
Companies Considered the Leading Companies in the Industry
Goldman Sachs
Private Wealth Management
Portfolio Management
Strategic Financial Planning:
Lehman Brothers
Investment Banking
Investment Management
Morgan Stanley
General Starting Salary and Potential for Advancement
Potential Job Prospects in this Field of Finance Investment
Project Financing Structured Finance Derivatives
From the Paper "The starting salaries in finance investment of candidates as Junior Financial Analyst having a bachelors degree ranges from $25,000 to $40,000 and those with an MBA degree ranges from $30,000 to $80,000. However, the added advantage of MBA degree will help in joining as Financial Analyst. According to Robert Half International who conducts survey of CFOs yearly, reports the salaries in thousands as: New recruit Financial Analyst of a small firm would be $23-27, New Recruit Financial Analyst of a large firm would be $26-31, experienced Financial Analyst of a small firm would be from $33-39, experienced Financial Analyst of a large firm would be from $38-47, Credit Manager would be $30-63, Tax Manager would be $57-105, Assistant/ Divisional Treasurer would be $40-78 and Chief Financial Officer -- CFO is $232-295 in leading firms and $80-120 in smaller ones."
Abstract This paper explores borrowing by corporations from the micro and macro perspective. First, the paper considers the influence of increased debts on the efficiency of the firm, explaining that proponents of high leverage claim that debt increases firm efficiency. Second, the paper looks at the macro issue, which is the impact of increase corporate debt on the stability of the country's economic and financial system.
Micro Issue: Does Debt Promote Efficiency?
The Macro Issue: How Does Debt Affect the National Economy?
From the Paper "Corporations usually prefer to use debt as a source of finance because of the tax advantage offered by debt financing. Interest payments made by a firm are tax deductible while dividend payments are not. However, in case of debt financing a firm is also exposed to the threat of bankruptcy and reorganization. According to the traditional view, maintaining the optimal ratio of debt to equity allows the firms to avoid such threats. Recent studies have focused on some other benefits that a firm may drive through increased debt financing."
Abstract This paper explores the issue of campaign finance reform in the United States. The paper looks at both sides of the issue, the first being the continuing quest for money versus complaints about how money taints the process. The paper looks at all other issues related to this topic including whether money is a corrupting influence, the constitutionality of campaign finance reform. The paper concludes that the issues which divide public and political opinion in the U.S. may not be able to be resolved.
From the Paper "It may be impossible to bring the two sides together. The Supreme Court has ruled that donating money to political parties or candidates is a form of free speech, but this does not mean the practice cannot be better controlled--even speech is not completely unfettered from legal restrictions. For that matter, while donations may be free speech, how candidates spend those donations may not be. Public funding of elections, though, would not undercut the need for these vast amounts of money unless restrictions on spending were also imposed."
Abstract This paper explains that, to use cost/benefit analysis, add up the value of the benefits of a course of action and subtract the associated costs.The author stresses there are times, such as sizing maintenance efforts or dissecting performance issues, when a cost/benefit analysis will not be informative or the right avenue to take for decision-making. The paper stresses that performance modifications may or may not have anything to do with functionality. Example.
From the Paper "In its simplest form, cost/benefit analysis is applied only with financial costs and financial benefits. For instance, a simple cost/benefit analysis of revamping equipment in a factory would measure the cost of the update and subtract this from the economic benefit of making the changes. However, in a more complex analysis, there are intangibles that must be included such as the personal impact on the individuals who had a slowdown during the revamp and, on the other hand, worker satisfaction with the new approach that increased efficiency and stressed ergonomic factors."
Abstract This paper compares Poland and India's international corporatefinances. It provides a brief economic description of each country in terms of their gross domestic product (GDP), their monetary policy and their foreign investments. The paper finally reflects on the inherent economic advantages and disadvantages of both the countries and provides a personal recommendation regarding the most suitable position for the building of a new production facility.
Table of Contents:
Introduction
Brief Description of Poland
Brief Description of India
Conclusion
Recommendations
From the Paper "Poland and India both provide an attractive destination for Multi National Enterprises in economic terms. Poland is one of the largest countries in Central Europe and accounts for half of the population (40 million) and nearly half of the economic output of the EU enlargement zone. India is the seventh largest country in the world with a landmass of 3,287,590 sq km. It is the second most populous country with a population of over 1000 million people. Poland provides a stable democratic government that is open to foreign investment, couple with recent economic boom, a relatively big domestic market, an ever-developing operational environment, a fairly favorable tax rate, and a transparent and effective legal system. On other hand India is world's largest democracy with more then 250 million highly educated and talented pool of individuals. Indian economy has made impressive progress over the 1990s in the wake of economic liberalization and globalization. Its economic growth averaged to 6% a year, led by strong advances in the services sector."
Abstract The paper explores and compares the politics, economics and culture of Mexico and India and then goes on to examine Mexico's DESC company and India's India Oil company. The paper looks at the financing, marketing, production and human resource practices of both companies and illustrates how the political, economic and cultural issues of a country have direct implications as to how businesses function.
From the Paper "The act of commerce is something which is universal to all cultures and countries across the world, as the exchange of goods and services is the foundation upon which the modern world was built. In consideration of this diversity in business as with country, there are distinctly different practices in regards to the practice thereof from country to country. To be considered are those countries of India and Mexico. It is worth noting that some cultural attributes may link groups from different nations more closely even that different groups within the same nation. In the consideration of such cultural differences in the practice of business between disparate companies, there are a number of factors to be considered, however those of politics, economics, and behavioral culture are of the most relevance to this particular situation."
Abstract An overview of the Nehemiah Corporation of California. The author explains that this corporation is the largest privately-funded down payment assistance program for affordable home ownership. This essay examines the purpose of this corporation, when it was developed and how it operates.
From the Paper "The purpose of the Nehemiah Corporation of California"named from a Biblical story in which Jerusalem was rebuilt"is to provide affordable income to people. "Don Harris the founder of the Nehemiah Corporation of California, started this program at a time when government funds for housing and affordable housing programs were disappearing throughout our nation, and along with them, the American Dream of affordable home ownership. Now, The Nehemiah Program? is the largest privately-funded down payment assistance program in the nation. Since 1997, The Nehemiah Program? has assisted over 97,000 homebuyers to become homeowners nationwide." (Broder). Harris is a real estate lawyer who was approached by the owner of a 120-unit townhouse complex, annoyed that most of his prospective tenants couldn?t afford to pay the down payment required for the homes. Harris then researched FHA and IRS regulations to learn that it was legal for a family member or a non-profit organization to donate money for down payments to qualified buyers."
Abstract The paper looks at multinational corporations and analyzes the nature of these businesses. It examines the diverse businesses that multinational corporations are involved in, such as manufactured good, dealing in natural resources, banking and finance. The paper discusses the multinational corporations' ability to reach all parts of the world.
From the Paper "Multinational corporations are located all over the world. They have everything they need to operate anywhere on earth. That is because they are self-sustaining. Some of these corporations produce manufactured goods such as cars; other multinational corporations deal in oil or chemicals. They produce and sell products all around the world. They may produce their products in Canada as well as in China and India. The products of multinational corporations are then sold in all countries around the world. The multinational corporations also extract resources from all parts of the globe and sell those resources all over the world. They also are involved in banking and financial.."
Abstract This paper uses a fictional scenario to demonstrate how a company, in this case, Intel, should decide from which sources it should obtain the required cash for financing a project. The paper uses Intel's financial statements from 1999 in order to point out the method for determining the relation between new debt and new equity and concludes that the $675 million dollars should be divided into two parts; the company should issue bonds for half the amount and new stock for the other half.
From the Paper "The second issued that needs to be discussed is the hierarchy of financing. There are researchers who claim that companies follow a financing hierarchy, with retained earnings being the most preferred choice for financing, then followed by debt, while new equity is the least preferred choice. This hierarchy obviously has a rationale. The first reason for which retained earnings are the favorite source of financing is maintaining flexibility. Managers value this characteristic, so they will generally avoid using external financing, which reduces flexibility, and try to use internal financing whenever possible. The second cause of the hierarchy is control. Issuing new equity weakens control, since the structure of the company's shareholders can significantly change, while issuing debt creates bond covenants, which, in turn, lead to changes in the company's management technique."
Abstract A report on a study conducted into banking and corporate decision making as it effects the society and environment in which the company is based. The paper looks at the effects accountability has on whether companies are socially and environmentally responsible. The purpose of this study is to assess the feasibility of integrating sustainable development generally and ASD more specifically into financial accounting analyzes used by commercial banks in the decision-making process for the extension of business loans.
Contents:
Introduction and statement of the problem
Purpose of the study
Definition of terms
Delimitations
Overview of the study
Literature Review
Valuing Environmental Damage
Corporate Social Responsibility
Activity-Based Accounting and Management
Synthesis
Methodology
Research Design
Case Study Structure
Survey Research Structure
Combined Research Design Summary
Data Analysis
Results
Summary and Conclusions
Summary of the Study
Conclusions
References
From the Paper "Each of the research questions was answered in the affirmative. The experiences of corporations, such as Fujitsu, that have implemented ASD systems have demonstrated the compatibility of ASD systems with standard financial accounting systems. The ASD system also has proved to be both effective and valuable to the companies. The experiences are strong indications that the implementation of an ASD system is not inconsistent with preserving the integrity of both the financial accounting system and the ASD system within a company."
